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Published on Aug 15, 2016
European
corporate bonds have snapped back after a quick Brexit selloff. Ira
Jersey, senior client portfolio manager on the Oppenheimer International
Bond Fund , said uncertain investors still sitting on the sidelines
should not think twice about getting back in. 'A lot of the issuers in
Europe are multi-national issuers,' said Jersey. 'They have diversified
portfolios of businesses so their revenues and sales probably won't be
that impacted by Brexit itself. The Oppenheimer International Bond Fund
is up 11% thus far in 2016, according to Morningstar. The $6.2 billion
fund has returned an average of 2.5% annually over the past three years,
outpacing 59% of its rivals in Morningstar's world bond category. The
fund sports a 3.2% trailing twelve month yield, according to
Morningstar. In terms of sectors, he is bullish on European banks which
have improved balance sheets and replenished capital. He also likes the
bonds of European auto manufacturers as pent-up demand and low global
yields should benefit sales. In emerging markets Jersey is a fan of
state-owned oil and gas companies. In his view, governments are
providing support for deleveraging these firms through asset sales and
lower government spending, which should help improve credit profiles. In
sovereign bonds, Jersey said he continues to see opportunities as many
of the Latin American countries appear close to the end of their hiking
cycles which they began about a year ago, while some high yielding Asian
countries are opening the door for further rate cuts. He said he
remains cautious on Turkey and to a lesser extent South Africa for both
fundamental and political reasons. Elsewhere, he is looking for
opportunities in Brazilian rates where the central bank is likely to cut
interest rates. In emerging market local rates, India and Brazil are
his duration biggest overweights, while he is underweight Malaysia,
South Africa, Thailand and Turkey.
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